1992 (12) TMI 206 - AT - VAT and Sales Tax

Photography services not deemed 'works contract' under 1941 Act; materials not subject to sales tax.

Studio Kamalalaya Versus Commercial Tax Officer

The Tribunal concluded that the photographic activities of the applicant do not constitute a 'works contract' under the relevant sections of the 1941 Act. ... - Issues Involved:1. Whether the photographic activities of the applicant constitute 'works contract' within the meaning of section 6D read with section 2(b) of the 1941 Act.2. Whether the refusal to issue declaration forms and permits was in violation of rules 27AA and 94 of the Bengal Sales Tax Rules, 1941.3. Whether section 6D read with section 2(b) is beyond the competence of the State Legislature.4. Whether the materials consumed in the process of photography are subject to sales tax.Summary:Issue 1: Whether the photographic activities of the applicant constitute 'works contract' within the meaning of section 6D read with section 2(b) of the 1941 Act.The Tribunal examined whether the activities of taking photographs, developing, printing, and enlarging photographs constitute a 'works contract.' The Tribunal concluded that these activities do not constitute a works contract as defined in section 2(b) of the 1941 Act. The Tribunal reasoned that the essence of the activities is the skill and labour of the photographer, and the materials used are incidental to the service provided. The Tribunal stated, 'The negative remains as before, even after the process and treatment employed thereto.' Therefore, the activities do not involve a transfer of property in goods as required for a works contract.Issue 2: Whether the refusal to issue declaration forms and permits was in violation of rules 27AA and 94 of the Bengal Sales Tax Rules, 1941.The Tribunal directed the respondents to dispose of the applicants' pending applications for permits and declaration forms in accordance with the law. It was noted that repeated applications for issuing declaration forms went in vain over a period of about three and a half years, resulting in the stoppage of supplies for the business of the applicants.Issue 3: Whether section 6D read with section 2(b) is beyond the competence of the State Legislature.The Tribunal did not find it necessary to go into the question of whether section 6D read with section 2(b) is beyond the competence of the State Legislature, as it had already concluded that the activities of the applicants do not constitute a works contract.Issue 4: Whether the materials consumed in the process of photography are subject to sales tax.The Tribunal held that the price of chemicals consumed or used in the course of developing and printing of photographs is not liable to tax under section 6D of the 1941 Act. The chemicals lose their identity altogether and are not retained in any form when the ultimate print or enlargement is produced. The Tribunal stated, 'The chemicals lose their identity altogether and are not retained in any form, when the ultimate print or enlargement is produced.'Separate Judgment by P.C. Banerji (Technical Member):P.C. Banerji agreed with the final conclusion that the transactions of the applicant are not taxable under section 6D of the Bengal Finance (Sales Tax) Act, 1941, but adopted a different line of reasoning. Banerji emphasized that the job of photography does not involve a transfer of property in goods and is primarily a contract of skill and labour. He stated, 'The photograph is transferred to the customer at the time of delivery. This transaction is, therefore, not a contract covered by section 2(b)(iv) and there is no contractual transfer which could be taxable under section 6D of the Bengal Finance (Sales Tax) Act, 1941.'Order:The application was allowed, and it was declared that the transactions of taking snaps, developing, printing, and enlarging a photograph do not constitute a works contract within the meaning of section 6D read with section 2(b) of the 1941 Act. Respondents were directed to dispose of the applicants' pending applications for permits and declaration forms in accordance with the law. The bank guarantee furnished by the applicants was to be dealt with in accordance with the law and released if no longer required.